Hospira to buy Orchid's generic injectable business for $400 million

The USA's Hospira has entered into a deal to acquire the generic injectable finished-dosage form pharmaceuticals business of India's Orchid Chemicals & Pharmaceuticals, which is among the top-five generic beta-lactam antibiotics manufacturers globally, for around $400 million.

The accord will expand on a relationship that began in 2005, when Australia's Mayne Pharma - now part of Hospira - and Orchid entered a commercialization and development agreement. Among other benefits, it will establish a direct presence in India, providing a platform for future commercial growth for the US firm, and secures full ownership of Hospira's primary beta-lactam portfolio and pipeline that were previously part of a commercialization agreement with Orchid;

The acquisition includes Orchid's beta-lactam antibiotics manufacturing complex (comprising cephalosporin, penicillin and carbapenem facilities) and pharmaceutical R&D facility at Irungattukottai, Chennai, as well as its generic injectable product portfolio and pipeline. Beta-lactam antibiotics represent a class of drugs with a wide spectrum of antibacterial activity.

And enters API supply deal

In addition, the companies signed a long-term exclusive agreement for Orchid to supply active pharmaceutical ingredients (APIs) for the acquired generic injectable pharmaceuticals business. This agreement builds on the existing product development and commercialization relationship between Hospira and Orchid.

"This acquisition aligns perfectly with Hospira's strategy to improve our margins and cash flow, by lowering our cost position for a key product line, and to invest for growth, by expanding our presence globally and reinforcing our leadership position in generic injectables," said Terry Kearney, chief operating officer of Hospira.

The transaction is expected to close in the first quarter of 2010 and be neutral to Hospira's earnings next year, excluding transaction-related expenses.
Hospira shares were recently up 1.8% at $49.87. The stock is up 86% this year and hit a 52-week high earlier on December 15, noted a Wall Street Journal report.

But deal sparks Orchid profit fears

Shares in Orchid Chemicals hit a 52-week high in early trades December 15 on the deal with Hospira, but growth concerns sparked a sell-off depressing the stock 10.6% this morning. "The money they will get is lucrative," said Sarabjit Kour Nangra, vice president-research, at Angel Broking. "The negative is it takes away their key driver, their key differentiator. I don't see any near-term trigger for the company. Though the balance sheet will become healthier, on the earnings prospects, things have turned a bit bleaker," he added, according to a report from a Reuters correspondent in India.